No signs of ‘bubble’ deflation just yet

Most ag economists agree that the so-called “farmland bubble” is likely to start shrinking in the coming months.

Some predictions have farmland values declining as much as 30 percent over the next three years.

But Farmers National Company president and CEO Jim Farrell isn’t totally convinced that’s going to happen—not very quickly, anyway.

“I’d says it’s possible that we could see 15 or 20 percent retracement in land values over time—maybe,” Farrell says. “But I think it’s going to take some fundamental change in the things that are supporting the market before we see that retracement.”

One of those fundamental changes, Farrell says, would be higher interest rates. Another would be a sharp decline in farm income, but Farrell says that picture is a little brighter than it was six months ago.

“Our crop insurance prices came in at a pretty good level this spring, higher than what we anticipated,” he says, “and then the farm program provided a few more supports for revenue that weren’t necessarily fully understood until the bill was written.”

Another stabilizing factor has been the strength in the livestock sector.

“We’re seeing strong rangeland prices when you go out west.  We’ve had some record sale prices out there—depending on where you are—for grassland or rangeland,” Farrell says. “The cow-calf market looks really good right now. And I think cattle feeders are doing okay right now.”

A new report from Farmers National shows Midwest farmland prices are running steady to slight lower compared to a year ago.

Link to Farmers National Company report

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